At this moment in time it is very difficult to say what the end result will be once the UK walks away from Brexit negotiations with its European counterparts. There is speculation and counter speculation about the economy, property markets and how the UK will fare in the longer term. One area which has been discussed in great detail is the financial sector and the fact that London would likely lose its European passport allowing it to offer financial services within Europe. So, in a worst-case scenario how would this impact the London property market?
Potential relocation of 100,000 financial workers
PricewaterhouseCoopers has suggested that up to 100,000 financial workers in London would need to relocate in light of changes after Brexit. This would still leave a substantial 600,000 financial workers in the London area but it is the impact upon this property market which some are concerned about. When you remember we are talking about potential enourmous changes to the UK by 2020, it is not a million miles away!
A report by UBS makes the rather strange assumption that the relocation of 100,000 financial services staff would potentially free up 100,000 homes in London. Even if we take this rather biased opinion it is still just 2.9% of a staggering 3.5 million dwellings within London.
London property market
If around 100,000 people were to relocate out of London in a relatively short space of time this would inevitably have some impact upon the London property market. Without knowing how many people rent and how many people bought their own property in London it is really difficult to say with any great confidence what would happen. Initially there could be more properties for rent or purchase although the overall impact would vary across the capital.
At this moment in time there are approximately 21,000 new houses completed in London each year therefore a potential additional 100,000 properties on the market would be around five times annual new supply. This is obviously a worst-case scenario and many estate agents have been complaining for some time of a lack of stock in London while demand remained strong. Whether there would be sufficient demand to hoover up the home vacated by those relocating is debatable.
London property prices
Sometimes it is easy to lose touch with the capital property market compared to the rest of the UK. The average house in London costs £478,142 which compares extremely favourably to the UK average of £209,971 according to the Nationwide June house price index. London property prices have increased by 55% since the highs reached in 2007, just prior to the economic collapse, while those living in the North of England have still not yet managed to reclaim their 2007 property price highs. This perfectly illustrates the strength and demand for London property.
Forecasts that up to 100,000 people will be forced to relocate from the London financial markets to Europe is possibly a fair assumption. However, the suggestion that 100,000 properties would then become available in London seems well off the mark. The truth is nobody really knows what the future holds and what relationship the UK will have with the European Union in years to come. Will we see a reduction in London property prices, possibly, will we see a collapse, unlikely.